March 23, 2023: In January, U.K. inflation suddenly increased as food and energy bills rose, placing further pressure on households.
The consumer cost index (CPI) increased by an annual 10.4%, above the 9.9% consensus forecast from the economists in a Refinitiv poll and up from 10.1% in January. Every month, CPI inflation was 1.1%, exceeding a forecast of 0.6%.
“The significant upward contributions to the monthly change in CPIH and CPI prices came from restaurants and cafes, food, and clothing, which partially offset by downward to contribute from recreational and cultural goods and benefits, and motor fuels,” the U.K. Office for National Statistics noted.
The Consumer Prices Index, which includes owner occupiers’ housing costs (CPIH), increased by 9.2% in the 12 months by 2023, up from 8.8% in January.
In January, the surprise increase marked a break from three consecutive months of slowing cost increases from the 41-year high of 11.1% reached in October.
British households continue contending with high food and energy bills. At the same time, workers across various sectors have launched mass strike action amid disputes more than pay and conditions in the latest months.
On Wednesday, the sterling increased by 0.4% against the dollar.
In talks with the House of Lords Economic Affairs Committee, U.K. On Wednesday, Finance Minister Jeremy Hunt stressed that decreasing inflation from its current “dangerously high” levels stays at the top of the government’s agenda.
“It’s the prime minister’s priority to halve inflation,” he stated. “Of course, we will be doing that in a way that maintains stability in financial markets as best as possible. But we should keep in mind that inflation itself is destabilizing, so it is not to reply to say that we’re going to suddenly change our minds and state that it’s acceptable to have a rate of inflation as destabilizing high as over 10%.”
He acknowledged deals that the accelerated pace at which central banks have released interest rates in efforts to release inflation has contributed to recent unrest all over multiple sectors of the financial markets:
“You’re right to say that the speed of interest prices increased is the root cause of the volatility we’ve seen in recent months,” he noted.
The Bank of England, Monetary Policy Committee, adjourning on Thursday to pronounce on interest rates. Last week, the European Central Bank increased its rates by 50 basis points even after storms in the banking sector.